The margin of a business is the relationship of profit to sales. If the cost of production of $100 worth of sales is $50, the company has a 50% margin. Margins can be measured at various cost levels. The margin measured after direct costs (called cost of goods sold) is called the gross margin. The margin measured after direct costs and SG&A expenses is called the EBITDA margin or the operating margin.

The margin measured after all cash costs is the pretax margin. The margin measured after all expenses is called the earnings margin. All else equal, rising margins mean rising growth and falling margins mean lower growth.

Back to Mission